Smaller energy suppliers have warned it is “too late” to come up with new schemes to help British households cope with an expected 82 per cent surge in energy costs from October, and instead urged the government to focus on expanding existing support programmes.
The two candidates in the race to become the UK’s next prime minister, Liz Truss and Rishi Sunak, have come under increasing pressure to produce detailed plans to reduce bills, which are predicted to soar by more than £1,600 to £3,582 a year on October 1 for a typical household.
Consumer charity Citizens Advice warned on Wednesday that one in four people would not be able to pay for their energy from October. Ofgem, the regulator, will announced the new price cap, which dictates bills for the vast majority of households, on August 26.
Earlier this week, the opposition Labour party proposed freezing the cap at the existing level of £1,971 for six months. The big energy companies have called for a similar freeze financed by a government-backed loan scheme that suppliers could tap to suppress bills for two years.
But three smaller suppliers, accounting for more than 1mn customers, have told the FT that the main proposals risked unintended consequences and would be difficult to implement before the October rise in bills. Any big policy decisions have been put on hold until the new prime minister is announced on September 5.
“It’s too late now to do anything else . . . you are either going to need to use the benefits system or the existing mechanism [that will offer] rebates through your energy bill,” said Nigel Pocklington, chief executive of Good Energy, which has 277,000 customers, referring to the Energy Bills Support scheme announced by Sunak when he was chancellor in May.
The EBS, which offers a £400 non-repayable discount to all households from October, was part of a wider £15bn energy relief package that has additional targeted support for the vulnerable.
Truss and Sunak have acknowledged more help would be needed this winter for vulnerable households. Sunak has also pledged to scrap VAT on domestic bills and promised in the Times last week that he would use existing mechanisms.
Truss, who has said she would temporarily scrap some green levies on bills, has yet to detail how she would provide further help beyond committing to an emergency Budget in September.
Bill Bullen, chief executive of Utilita, Britain’s ninth-biggest supplier with more than 800,000 customers, warned it was “very late in the day to introduce a new mechanism unless people are prepared to get extraordinarily busy in September”.
He also warned that the loan scheme proposal could cost his company millions of pounds in interest payments. “Even if the government is guaranteeing it so the interest rate is relatively low, it’s still a huge amount of money,” he said. “The default option really is we carry on with this EBS scheme and we make those numbers much bigger.”
Green Energy UK founder Doug Stewart said: “We are running out of time because winter is fast approaching and we don’t know what we are doing.”
The companies urged ministers to reconsider the price cap in the medium term. “It is an idea that has completely run its course,” said Pocklington.
Larger energy companies have insisted the new prime minister must examine all options. “Lots of ideas have been put forward and a robust review of all these options is needed,” said EDF Energy, the fourth-biggest supplier in Britain.
In response, Truss’s campaign team said that tax cuts and supply-side reform was the “most effective way” of dealing with the cost of living. Sunak’s team said Truss’s plan was “rapidly falling apart” and would be “far too late”.
The rising cost of the energy crisis was underlined by National Grid when it warned that the costs of keeping up to three of the UK’s coal-fired power stations open this winter could be as high as £420mn The government ordered the plants, which were due to close in September, to be put on standby as part of emergency measures for the colder months in case of a Europe-wide gas shortage.
Additional reporting by Jasmine Cameron-Chileshe and Sebastian Payne
Source: Financial Times